Businesses and companies outsource various economic tasks, including marketing, IT, accounting, and payroll.
However; many businesses and company owners are unaware that they can outsource their financial activities.
Such services are given by outsourcing CFO in order to have financial experts and their access to keep up with best practices in the financial field.
It also allows businessmen and business owners to have the expertise they require rather than having full-time resources. Take a look at the Top 10 outsourced CFO services for startups described by ESPECIA.
Understanding outsourced CFO services
An outsourced CFO is also known as a fractional CFO. They offer the same services and skills as that of in-house hire but based on contracts.
So if a person is responsible for the finances of your business; then he will be a contractor rather than a full-time employee.
Outsourcing a CFO is one of the best options for businesses and companies which can't afford a full-time CFO.
It costs less than hiring a traditional CFO full-time. In other words; an outsourcing CFO offers the same services as a full-time CFO. But why do you need an outsourced CFO? Take a look at the functions and benefits of a CFO below.
Benefits of outsourced CFO services
Outsourcing CFO services is the perfect way to meet the financial challenges of a business and Company.
Everyone uses outsourced CFO services, from private corporations to small startups and all kinds of enterprises in between. Here's why:
- Outsourcing a CFO can help you plan and build a budget for your finances. This makes sure that the finances and challenges of your business and startup are always under control. This way, you can ensure the amount you spend and what you are spending is ideal. This also allows you to save spending for the future.
- These services offer great insight into financial projections for the future. They help to recognize the revenue potential for your business. You can also analyze how your company and business can perform in the long and short term.
- One of the biggest challenges that startups and businesses face insufficient cash flow. Having improper cash flow can result in a struggling startup and financial future for the business. Outsourcing CFO services and ensuring your company has enough capital to invest in various services and pay for expenses. They also help to manage and regulate cash flow.
- Outsourcing CFO services also helps in financial reporting, such as income statements, profit and loss balance sheets, and others. These reports allow you to view the financial health of your business at a look. Financial reporting can also help you to demonstrate investors or financers during investing or funding.
- Outsourcing CFO is a great value option for making presentations for stakeholders and investors. They can easily handle every inquiry and question due to their extensive skills and experience that your business received.
- Risk is a part of the business that is inevitable. Entrepreneurs and businessmen always know crisis and risk better than anyone. If hazards and risks are not appropriately managed, it can lead to catastrophic consequences and insufficient business growth. It can also cause the startup to terminate. Outsourcing CFO services help to control risk and crisis. They have comprehensive knowledge across industries and different markets, which helps to identify and prevent risks. They are suitable for risk management related to your existing financial management, internal operations, and external market conditions.
Top 10 outsourced CFO services for startups
Identifying a perfect outsourced CFO for your company based on your criteria and demands is extremely tough. Here are the top 10 CFO services and skills for startups that you need to look for.
One of the main services that outsourcing CFO provides is compliance, especially related to tax. An outsourced CFO with specific skills, knowledge, and experience in compliance helps significantly during tax issues.
Tax compliance is one of those operations in a company that takes energy and time, which causes stress. But these operations are well handled by the outsourcing CFO.
Outsourcing CFO can handle tax compliance while you can focus on other required operations of your company, such as talking to customers.
You can also have a piece of mind by knowing that audits and tax returns are filed on time.
Even if something goes wrong, the outsourced CFO is capable of resolving the problem, so you don't have to be concerned. Simply put, they assist in getting rid of obstacles and compliance issues that businesses encounter.
A capable outsource CFO offers collaboration with your business team, including you. They offer insightful and exclusive training to help everyone have a better understanding of finances and the implications of business.
Their collaboration and training help everyone improve in their field and finances. They have skills in cash flow management, bookkeeping, reporting, forecasting, due diligence, etc.
Navigate customer contracts
An ideal outsourced CFO provides expert advice to business owners and founders to negotiate with their profitable customers and contract.
You can also ask for related examples of their past experience in the field. Potential outsourcing CFO also have relevant skills to identify risks that can result in a bad future for the company.
They also help to ensure that contracts and customers do not expose a company's risk. They also have the skills to identify whether the contract is in the best interest of the startup or not.
They also suggest ideas and plan to make contracts better and more profitable from a business perspective. Make sure you hire an outsourced CFO with relevant skills and experience in the field with a customer base.
Punctual with a schedule
This is not a skill but a relevant factor that should be in an outsourced CFO for your business. Because they are outsourced, they give their own hours to your work.
So to make these services work properly, they should be punctual and have a fixed schedule. Make sure they work accordingly to catch-ups and meetings to offer their services.
Contribute to business growth
In addition to overseeing financial operations, the CFO is committed to business expansion. They help to optimize as well as build financial processes for you.
They put all their effort into creating a stunning presentation that would wow investors and stakeholders. They also make sure that the presentation of the CFO is confident enough that investors will choose you for the job.
They should have the capability to recognize the area of the startup that needs more priority than others.
They also contribute to the department's funding and planning to pay bills. They also have the knowledge to recognize and analyze the profit and loss of the company and regulate cash flow forecasting. They also help to make specific strategies that contribute to handling financial paperwork and offering implementation.
They also have knowledge of internal processes and know o how to keep risk under control.
Other skills include payroll management, accounting system design, accounting system implementation, and professional scrutiny.
Hire an outsourced CFO for your startup that has skills and services that revolve around strategic modelling to have alternatives for every situation.
This ensures that your startup operates continuously and has financial support even in the worst-case scenario.
The outsource CFO should have a proper strategic understanding to bring awareness across crises and risks of the business.
They control risks ideally and highlight if there are any uncertainties or weaknesses in your business or startup model.
They are capable of making strategies for the best-case scenario. This will also make your team more encouraged and innovative.
It helps to support and elevate the culture of startups. It also allows other departments and the Finance team of your business to act as a strategic partners.
It develops creative and strategic thinking in the owner and encourages collaboration. If hiring a CFO through outsourcing is the best option for your company, it will also benefit other departments and activities.
They also help in front of stakeholders and help to keep the situation under control—strategic modelling results in increased investor, customer, and employee confidence as well as improved overall performance.
Management of resources
Having an outsourced CFO greatly contributes to the management of resources. They help to manage the financial department, capital raising, customer relationship, product development, business operations, and employee operation.
Make sure you ask for the support of the outsourced CFO and see their specifications in this line. If you don't fully trust your outsourced CFO, there may be peer pressure and little benefit as a result.
Ensure that the outsource CFO is an expert in their field and for your business. They should be capable of saving a lot of resources, effort, and time.
Every start-up and business need to have financial projection. This helps to attract investors and stakeholders. This is also a foundation of your budget.
An external CFO or finance professional must create financial projections to make reliable predictions.
An outsourced CFO uses financial results and analysis from the previous period to have a realistic prediction of how the company will perform in the coming years.
They are capable of analyzing revenues and expenses across all departments of business, and credit houses' expenses can grow.
They also predict how many new workers you require to complete the revenue target. They are also responsible for extending and maintaining financial projections and seeing if they are already in place.
An outsourced CFO helps to build a budget and track the financial position of your startup. Make sure you choose an outsource CFO that should be really capable of this responsibility.
Their effective budget skills contribute to bringing the business to the top and ensuring a good financial position for the business.
They always ensure that you are aware of your revenue position. Budgeting helps to create strategies for a better future for the business.
This is not only crucial for the short term but also for the long term. Look for the level of support and budget services before hiring an outsource CFO.
An outsourced CFO should excel in financial reporting. They should exchange useful information by examining financial records, including profit and loss statements, income statements, balance sheets, and others.
They should have relevant skills to interpret and analyze financial reports and offer valuable insight.
This significantly contributes to the financial health of the startup. This analysis helps show whether the company is on a financial track.
Outsourced CFO services help to add significant value in all aspects of business in different ways. They contribute to financial planning as well as analysis, such as forecast and budgeting. They help to analyze overall weaknesses and financial strengths.
They also suggest and make strategies for improvements. They are also responsible for the evaluation of the reporting system and financial data.
They add value to the business by recommending strategies for improvements. You don't have to worry about hiring a full-time CFO when you can easily hire an outsourced CFO to help interpret financial data.
The strategic decisions and financial decisions of outsourcing CFO significantly contribute to the overall growth of the business and achieving the goals.
What is an outsourced CFO?
An outsourced CFO is a financial expert hired outside your organization and offers top-tier operational guidance, accounting, business, and financial advice for your company. They can be full-time or part-time, depending on your requirements and needs.
Why outsource a CFO?
Outsourcing CFO is the best and most effective way to keep the financial department in check and the business running. You can hire them on a contractual basis for some specific services rather than hiring a full-time CFO.
What is a fractional CFO?
A fractional CFO is one of the types of outsourced CFO. They do not offer full-time services and can perform virtually.